UK government clients are frequently attacked for stifling innovation with conservative approaches to procurement. Can the Royal Academy of Engineering, with the help of the UK’s most recognisable and recognised engineer Sir John Armitt, change that?
We need to find ministers, who are prepared to say to their departments, ‘You are free to make mistakes. You are free to mentally allocate some of what you are doing to the 70/30 projects where, in fact, there is a good 30% chance that it will not work - but the 70% is worth going for, so let’s go for that. If it goes wrong, you won’t be hanged, but you will actually be praised for having a go. Because we are willing to take a risk, there will be certain things that will be successful’.”
That is the refreshingly progressive view of Sir John Armitt, set out in a Royal Academy of Engineering report aimed at helping the government improve its approach to procurement. Innovation carries risk, concludes the report, but it can also deliver big wins.
Speaking to NCE ahead of Thursday’s report launch, Armitt is no less assertive on the need for ministers to recognise that innovation can cost you.
“If you want to innovate, you have to accept that there are risks, and so you need flexibility in your budget,” states Armitt. “And you need to be open and honest about that.”
The report presents the findings of series of workshops that drew together civil servants and senior figures from a wide range of industry sectors.
There needs to be understanding that something might not be proven and that if you go ahead there are risks
The light bulb moment, so to speak, was the realisation that, regardless of whether you are buying an aircraft carrier or building an underground railway, the project can be considered as a series of interactions and interdependencies with individual elements. And once you recognise this holistic view of a project as series of systems, then you can identify the critical interfaces - whether they are physical interfaces like regional boundaries in a rail system or supplier interfaces between two ICT systems - and identify early the ways they could fail.
This is the crucial point, as it means you can manage the risks - and so have confidence to invest in innovation. And, Armitt says, when it comes to taking this systems approach, engineers have a lot to learn.
“Engineers have to accept responsibility here,” he says. “You cannot be over optimistic about what can be achieved. There needs to be understanding that something might not be proven and that if you go ahead there are risks.”
Impact of failure
And of course, risk is a scary concept in the public sector, when the financial impact of failure in procurement, and public reaction to it, can be highly significant.
What was different about the Olympics was the recognition that the client had a responsibility to provide the leadership
As the report notes, while in a commercial setting, a 70% success rate across all ventures would be celebrated, in the state sector - where public money is being risked - every failure is scrutinised.
So the government needs to find a way of accommodating the potential for failure where there is a desire for innovation or where there is an unavoidable degree of risk.
It needs to understand that a 30% failure rate does not necessarily equate to a 30% wasted cost; by factoring in the risks associated with innovation early in the planning stage, failures can be identified early and a change of direction can be implemented before severe financial ramifications occur.
Armitt was, and remains, chairman of the Olympic Delivery Authority (ODA). It’s an organisation that delivered to time and made savings of over £1bn from a final budget of £8.1bn for the venues, infrastructure and transport of the 2012 Games. Much of its success was put down to the clarity of the ODA’s vision, the leadership the ODA provided, and the way two years were set aside at the start for planning and preparation.
“What was different about the Olympics was the level of collaboration across all the projects. This came because of the recognition that to deliver these projects successfully, the client had a responsibility to provide the leadership,” says Armitt.
And that client was not averse to procuring innovation - an example being the Olympic Stadium’s phthalate-free PVC wrap.
“Initially, there were no bids to supply [it] because of the difficulty of producing a suitable material,” explains Armitt. “But the invitation to tender encouraged some companies to continue to work on the problem and, after six months, one company, Serge Ferrari, had successfully developed the wrap and was able to supply us.”
But ultimately even the Olympic Stadium is an example of innovation stymied by government caution, admits Armitt.
“The Olympic Stadium is actually an interesting example because if you look back to 2007, the debate was whether you build an adaptable stadium but without a long-term anchor tenant; or build something demountable that removes the white elephant. Fast forward five years and you’ve got the same debate again, only now with the emotional attachment and a tenant that wants to move there and retain it.
“So you end up revising it again, and it is probably costing more now than it would have done to build in the flexibility at the time,” he muses. More willingness to innovate in 2007 would have saved money in the long term.
It’s pretty hard to see any scenario where a different decision would have been made regarding the Olympic Stadium. As Armitt says, “ministers at the time were in a ‘damned if you do, damned if you don’t’ situation”.
But could they be persuaded to accept something similarly bold in a future project?
There are signs. Armitt and the Royal Academy of Engineering report make a nod towards London Underground (LU) and its efforts to encourage innovative solutions on the Bank Station upgrade project, where contractors first put forward plans and then worked closely with LU to establish the details of how the project will be delivered.
So how to get more clients going down that road? The report’s ultimate recommendation is for the government to ring-fence 0.1% of its annual £235bn procurement budget for innovative procurement, to be administered by innovation agency the Technology Strategy Board.
Such a move would require the recruitment of experienced specialists to manage the budget and the projects it is spent on. It would also need the buy-in of a lot of government departments and their ministers. But it’s got to be worth a go.
Overhauling public procurement: Top tips
The Royal Academy of Engineering says a systems-level overview of projects is essential. This involves:
- Long term leadership and a clear, concise vision
- Procurement should be treated as part of a wider project
- Investment in a significant period of planning and specification with clear gateways and reviews
- Commissioning skills to be actively and effectively engaged
- All players must be motivated to engage in the right behaviours
For the IT and infrastructure sectors, there are further lessons to be learned. These include understanding the importance of:
- Achieving clarity of values and drivers
- Scoping and budgeting holistically
- Maintaining continuity of priorities; there must be awareness of the impact of moving goal posts during delivery
- Engaging SMEs that can play a critical role in procurement, particularly in driving innovation
- Allowing flexibility when change is needed for programme success
- Having engineers on the client and supplier sides who speak the same “language”, and are able to successfully communicate the purpose of a project and build successful specifications together
- Having the right capabilities in industry and government to communicate and understand the need and the solution
- Instating a system architect or design authority with oversight of an entire project